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Large supply mean low crop prices

BY KAITLIN DEWULF | OCTOBER 03, 2014 5:00 AM

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Iowa farmers forecast one of the largest corn and soybean harvests in the past decade this season, resulting in declining crop prices and farmland values — something some local farmers said could cause future profit strains.

In recent years, poor weather conditions have decreased the size of the Iowa harvest, resulting in high prices. But this year, farmers are experiencing the opposite — greater supplies and lower prices.

“There was a significant decline in crop prices,” said Grant Kimberely, Iowa Soybean Association director for market development and an Iowa soybean farmer. “This means most farmers, unless they pre-sold their crop at higher prices, aren’t going to make any money this year.”

At the end of 2013, corn prices declined from $8 to $4 a bushel, according to the Iowa Department of Agriculture. On Wednesday, prices fell further to $2.84 a bushel — down nearly 64.5 percent in less than a year.

Soybean prices are also declining.

On Wednesday, the average price paid for soybeans was $8.52 a bushel — a drop of $3.81 from the end of 2013.

Russell Meade, Johnson County Farm Bureau board president and a corn farmer, said the large supply has outstripped the demand, and the surplus is weighing down prices.

Meade said the sudden price decline is causing a “sticker shock” among Iowans, farmers and consumers alike. Although in recent years high prices brought immediate cash flow for local farmers, he said it was necessary for the prices to come down in order to stabilize Iowa’s economy.

“If any price is too high for too long, it will negatively affect the grain market for the United States long-term,” he said.

As corn and soybean prices decline, land values also decrease, according to the Iowa chapter of the Realtors Land Institute, an organization that tracks trends and values in Iowa farming.

Over the past year, farm values have fallen nearly 10 percent, from $8,700 an acre to $8,000 today.

“Land is the major asset; it’s the factory of farming where you manufacture and produce your goods,” Kimberley said. “If your product isn’t worth as much, then the factory doesn’t have the same value, either.”

Ed Kordick, Iowa Farm Bureau commodity services manager, said much of Iowa is farmed by rental agreements.

“Little can be done to stop land value trends,” Kordick said. “One of the major influences right now may be crop price, because as the income-earning ability of the land falls, the asset may decline in price.”

Ben Schmidt, Iowa Soybean Association board director and soybean farmer, said he pre-sold a portion of his crops higher than market prices, but the low averages make it difficult to figure out what to do with what he hasn’t sold.

“As a farmer, you have to be optimistic or you wouldn’t farm,” Schmidt said. “We’re going to have to reassess some aspects of our operations and try to cut costs wherever we can.”

He said in the world of farming and agriculture, many elements are uncertain, and farmers accept that whole-heartedly.

Kimberely said although farmers are facing issues now, they are “eternal optimists.” 

“[Farmers] go through these cycles of peaks and valleys,” Kimberely said. “And you can only hope they aren’t too severe and turn out somewhere in the middle.”


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